Borrowers should reassess their budgets and consider their loan options with rising interest rates set to continue, mortgage brokers say.

The Reserve Bank of Australia on Tuesday raised the cash rate by 25 basis points to 3.50 per cent, from 3.25 per cent, following its monthly board meeting.

The move followed a similar rise in October.

Mortgage Choice corporate affairs manager Kristy Sheppard said the rise would affect the majority of mortgage holders, with its data showing 95 per cent of all new loans carry variable rates.

The last two rate rises would add almost $100 to each monthly payment for the average borrower, Ms Sheppard said.

“If rates rise by another 0.25 percentage points in December, as many are predicting, and lenders pass that on, this borrower would watch their monthly mortgage repayments rise by another $49.05,” she said.

Mortgage holders should be making repayments as if rates were at least one or two percentage points higher, but many would now be experiencing their first rate rises, Ms Sheppard said.

“For those finding the changes a challenge, it is time to reassess budgets and consider the options available,” she said.

Resi Mortgage Corporation’s Head of consumer advocacy Lisa Montgomery also warned borrowers to brace for further rate rises.

“It’s feasible that in the next six months those borrowers may have to find an additional $200 per month for repayments from somewhere within their household budget,” she said.

“That’s the scenario they should be focusing on.”

AAP